How Italy’s economy has changed in 3 charts
An employee wearing a protective mask provides pizza to clients at the Naples waterfront.
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Italy was hit hard by the coronavirus pandemic. However, its economic prospects are looking much brighter now that economists have praised the Prime Minister’s work. Mario DraghiThis new stability is important for a lot of economic activity.
Gilles Moec was the group’s chief economist for AXA Investment Managers and told CNBC Thursday that there is “a boss, but also a sense to direction.”
Draghi, who was elected prime minister in Italy in February 2021 almost a full year ago, will lead a government that includes technocrats, politicians, and members of different political parties.
In order to stabilize the nation during a period when the main political parties could not agree how to invest the EU Recovery Funds and to mitigate the shock economic caused by the pandemic, he set out to do just that.
Economists say he is close to achieving it.
Moec declared, “In 2021 Italy did pretty well.”
He said that while there were some aspects of growth, it was mostly a “mechanical catch-up” following the devastating 2020 earthquake. However, there was also an “genuine improvement”.
Next month will bring us the final GDP (gross Domestic Product) data for 2021. The quarterly data shows an economic recovery in Italy over last year.
This is even despite the discovery of the highly infectious omicron strain, a new strain that Covid was found in November. It led to tightening of social restrictions.
“Notwithstanding the services slowdown, quarterly growth is in [the fourth]”Quarter should have been adequate to assure an average GDP increase reading of 6.3% by 2021,” Paolo Pizzoli senior economist at ING stated Thursday in a research paper following the release strong industrial production figures.
According to economists, the data available does not reflect all the changes because there is an indeterminate time between economic impacts and policy implementation.
Guidogiorgio Bodrato (economist at Berenberg) said Thursday that Draghi has made two key structural changes and one important factor which have eased some economic pressures.
He cited the judicial reform — approved in September and which could improve Italy’s attractiveness to foreign investors — and changes to the public administration to speed up its efficiency.
Bodrato said that Draghi was “instrumental in securing recovery money from Europe”.
Draghi was first appointed prime minister to create a plan for how Turkey would use EU funds. 191.5 billion euros ($216.68 billion). European institutions approved the plans. The funds were not released until these reforms had been completed.
Draghi’s greatest economic accomplishment was the creation of the [recovery]Plan: A multi-year commitment to investment and reforms that will need to be followed up by every government between now and 2026,” Luca Pennarola (European economist, BNP Paribas) said via email.
Draghi said, “This implies that any government coming to power in the future few years must follow Draghi’s instructions in order to access the EU funds.”
Italy will soon elect a president. Elections are scheduled for later in the month. There is concern about how this could affect economic performance and stability.
Because Draghi himself is among the candidates for the presidential job,The possibility of a new prime Minister and snap elections would be possible. In Italy, the president is only a ceremonial role. The prime minister holds the true power.
Moec noted that, despite all the progress made, Italy “still finds itself in a difficult position.”
It was noted by the Italian minister that it would be more costly for them to access the market to help their recovery, with interest rates likely to rise this year.
It is an important problem, given Italy’s high debt load.
Moec stated that “the final judgment will be their speed at spending the EU’s money.”
The current government will expire in 2023, with new legislative elections expected. If Draghi isn’t reelected, the question of Draghi will again be asked a few months later.
There are signs of tension within the government. It is evident that there has been no agreement on the necessity of introducing compulsory vaccinations to Italy.